Dropshipping is a popular business for entrepreneurs. It is also the best option for anyone starting out as a beginner in the business community. You can learn at your pace and gain experience almost at no cost.
Although dropshipping is not a highly sort-after business, but being in it increases your chances of earning more and losing little or nothing.
Here in this article, we will discuss what dropshipping is and how to go about it if you are just starting out as a businessperson.
This is more like an advanced retail method where goods are supplied based on orders to the customers. A dropshipper can be a retailer, manufacturer or wholesaler. The main thing is that you do not have to keep goods in stock rather you sell them directly based on orders from customers.
Dropshipping and regular retail model are similar. But the difference is that, in dropshipping, a trader does not keep products in stock. All you have to do is make purchases either from a wholesaler or manufacturer to fulfill orders.
How Dropshipping works on Shopify
Shopify is a popular e-commerce website. Two mutual approaches related to dropshipping on Shopify are to find a supplier in North America or anywhere else in the world. To do this, you can use supplier details or find out a Shopify App that connects you and your business to thousand of suppliers.
To accomplish the latter, we suggest Oberlo. It is a developed marketplace by Shopify that helps independent businesspersons search for products to sell.
There are lots of things you can do with Oberlo. You can browse AliExpress and import your desired products directly to Oberlo–which is also has a link to your Shopify store with just a click of a button.
If a customer purchases a product, you can fulfill their order with the Oberlo App. Luckily, Oberlo automated order process. All you have to do as a store owner is to confirm that the details are correct and the click “order.” From AliExpress, the product is then sent directly to the customer—anywhere in the world.
Benefits of Dropshipping
The benefits of Dropshipping are quite numerous but first, it is a good business choice for aspiring businesspersons or entrepreneurs. You have the opportunity to test different business ideas with little risk attached. With that, you can also learn a lot about how the market works, which goods sell more, in-demand products and where these products sell more. Besides this, there are other benefits too and reasons why it is a good business choice.
This is more like the biggest benefit of Dropshipping. It is very possible to launch an ecommerce store without you investing thousand in inventory up front.
The good side about this also is that you do not have to get a product except you have made such sale before or you have received payment from the customer. You do not have to buy and keep in stock like the contemporary retailers do.
Easy to start
Starting an ecommerce business isn’t such a hard task as you will not have to deal with physical products. You do not have to worry about packing and shipping and orders, or managing a warehouse. Also, you do not have to worry about ordering products and handling stock level. You can track inventory for accounting purposes and handle returns and inbound shipments. You can also pack and ship your orders.
Your overhead expenses are seemingly low because you do not need to handle purchasing inventory or warehouse management. You can successfully run your dropshipping store as a home-based business. It requires more than a good laptop and few repetitive expenses to work. As you advance in business, these costs will increase but will still be low when compared to contemporary businesses.
This is one of the juicy features of dropshipping. You can run your business from anywhere as long as you have an internet connection. You can also manage dropshipping with any other business of yours as long as there is nothing that will bridge your communication with customers and suppliers.
Dropshipping gives you multiple options to choose from. You can select multiple products to sell from different brands. Since you don’t have to pre-purchase the products you sell, you can show a variety of trending products to your potential customers. Anytime suppliers stock qa product, you can then list it for sale on any online platform of yours at no extra cost.
You can test-run
If you are a beginner in the business world, you can use dropshipping to determine customers’ taste. You can use it to launch your store. Dropshipping also helps you list and potentially trade products even before you decide to commit to buying in large quantities.
Downsides of Dropshipping
No matter how attractive we have made it look, dropshipping still has its own demerits. It is not enough to talk about the good sides alone. Comfort and simplicity also come at a price. We will briefly discuss the downsides of dropshipping.
This is somewhat if not the biggest disadvantage associated with dropshipping. Because it projects simplicity and easy-going narrative, many competing store’s will still sell products at rock-bottom prices. All in a bid to grow revenue. Since they only have to make little investment, they can afford to trade on minuscule margins. These traders will typically consider low-quality website’s and bad customer service. You can use this to make your business stand-out. Although customers will still compare your prices to theirs. Therefore, the increase in unhealthy competition will destroy the potential profit margins in a niche.
You are likely to have issues with separating your products especially if you source from different warehouses. These warehouses also fulfil orders from other merchants, which means inventory can change on a daily basis. But you can use apps that allow you sync with your suppliers. With this, you can just pass along orders to a supplier with a click or more to enable you see in real-time how much inventory the supplier has.
Oberlo also allows merchants take automated decisions when a stock reaches zero. For instance, when an item is exhausted, you can automatically delete the product, or automatically set the quantity to zero.
Because you have to source your products from different dropshippers, you will experience shipping problems that twists your shipping costs.
For example, if a customer orders for three products, and they are all available but from different suppliers. You will have to pay for three separate shipping charges for delivering each product to the customer. But know that it is not appropriate to shift the charge to your customer. Even if you do, you will experience difficulty while automating the calculations.
Mistakes from suppliers
This is one of the major downsides of dropshipping. It can even make your business go south. As a dropshipper, you must be ready to receive blames for the mistake of your supplier. Even though it is not your fault, it is you the customer knows, and you will receive the blame. No one is above mistakes. But when suppliers cause you frustration with botched shipments, missing products, and bad packaging, that can damage your business reputation. The chances of these ugly occurrences are high.
Limitation in customization and branding
It is important you know that dropshipping does not give you overall control over any product. Oftentimes, the supplier is responsible for designing and branding of the product. In other words, some suppliers can consider your business’s item changes but the supplier still has full control. Also, any changes to the item will require a minimum order quantity to make it affordable for the manufacturer.
Frequently asked questions about dropshipping
Before we conclude, it is necessary to answer various questions asked about dropshipping
How much investment do I need to begin dropshipping?
Although it is quite difficult to guess the exact cost for starting dropshipping, there are important items every dropshipper must have in order to get started. Here’s a summary of the necessary costs.
Estimated cost: ~$29/m
You just have to find a platform or website preferably an ecommerce builder. It will help you create and host your online store. We initially recommended Shopify and we still recommend it. With Shopify, you can easily sync with the Oberlo marketplace to get products, and get your business running easily.
Estimated cost: $5-20/year
Building trust with customers is quite a difficult task. But with your domain name, you get to reduce the stress of convincing them about your authenticity. Even though there are other top-level domains available, we advise that you go for a .com that matches your brand.
Estimated cost: Varies
We all know that dropshipping allows you have little involvement with managing your product catalogue. But you can set a little amount of money aside and time so you can test the products you plan to sell. If you don’tdo this, you risk listing a product with many issues or defects. This will turn out to make your customers unhappy and you will spend a lot of time dealing with returns. Also, if care is not taken, it can even jeopardize your business.
Estimated cost: Scales with your business; we advise you have a budget of at least $500 to get started.
You must learn to reduce the average cost to get customers via organic channels like word of mouth, SEO, etc. But advertising is very necessary for many product-based businesses. However, the most popular channels include social media ads, mobile ads, search engine marketing (SEM), and display ads.
Earn big with dropshipping
Dropshipping is all about product curation. All you need to do is go for the best blend of products that will satisfy your customers. You can help potential customers locate the right product. Also, you can add the cost of providing customer assistance when necessary.
Suppliers are comfortable having dropshippers market their products because it marks up products individually in exchange for distribution. Dropshipping also increases business profit and drive extra sales than when a supplier have to market the products. To increase your profit in dropshipping, it is important to know how much it costs to gain a customer, then price your products with that in mind.
Is Dropshipping a recognized business?
Yes, dropshipping is a legal business. It is widely used by numerous global retailers. This question pops up regularly because of how dropshipping works. A good number of retail stores do not sell products that they manufacture by themselves. Dropshipping then adopts this approach and channels it into a fulfilling an ideal model that suits an online business.
If you want to enquire about the basic things you need to run your business legitimately, you can contact a lawyer who is an expert in cases like this to help you. Just like every other business, customer satisfaction is Paramount. Align your expectations and build a brand that corresponds with the right audience. That’s the key to long-term success.
Is Dropshipping worth it in 2020?
Dropshipping is worth it in 2020 but then the pandemic has brought restrictions to supplies and trading across the world. But people still find their way around it to purchase products and sell.
Before we wrap up this article, be reminded that Dropshipping is not a sweet, perfect business. It is also not the best way to grow successful online business but with hard work you can achieve a lot. Despite the challenges and restrictions, you can do well with proper planning and research. Also, do not let these challenges limit you or prevent you from building a profitable Dropshipping business.
Additionally, before you start Dropshipping, you can build your online presence first. Develop your audience, both on Facebook, Instagram, and other social media platforms. This will help ease the stress of getting customers when you start Dropshipping. If you already have an existing audience, consider yourself lucky then, because it will make marketing much more easy for you.